From: William Livingston [vitalith@earthlink.net]
Sent: Thursday, March 06, 2003 3:41 PM
To: rule-comments@sec.gov
Subject: File No. S7-45-02
Mr. Chairman and Honorable Commissioners:
You are soliciting comments on proposed rules setting standards of professional
conduct for attorneys who appear and practice before the Commission on behalf
of issuers. Release Nos. 33-9196; 34-47282; IC-25920 solicit comments in particular
under Section 307 of the SOA concerning the rules adopted and the "noisy withdrawal"
alternative. As a licensed professional engineer, I am legally bound to respond.
All the items under 307 relate to method. The prime directive is a process designed
to attain a particular outcome. The sequence of actions to 307's purpose is to thwart
the approaching event of material damage to a client stakeholder. The subordinate
matter of noisy withdrawal concerns the design of a personnel escape hatch to be
used in the event the mission to deflect the damage event must abort. Many personal
experiences in this brutal arena suggest that once the preemption struggle has been
lost to status quo, the commitment of all-conquering business as usual to generate
damage is absolute.
The withdrawal step of the process is to preserve the good shepherd and faithful
servant - and nothing else. The fireworks display of his withdrawal will be no more
persuasive than his failed preemption enterprise. All traces of his activity will
immediately be erased from the record. Dramatic expulsion of the preemptive
whistleblower serves as a reminder to those remaining about what happens to anyone
brazen enough to interfere when business as usual turns stakeholder toxic. The
floggings will continue until morale improves.
For the professional, the compelling purpose here must be damage preemption - and
nothing else. The primary assignment to detour damage is, exactly, why society
established the professional class franchise in the first place. The imperative to
forestall damage is enforced by the tort section of civil law - focused exclusively
on a preemption specification called foreseeability. The corresponding corporate
incentives for preemption under criminal law are imposed by the US Sentencing
Guidelines (USSG). All of the USSG provisions are based upon preemptive organizational
machinery being in place before the fraud was committed. Comply with the law and you
obtain "free" liability insurance. Defy the law and cause damage and you are subject
to penalty. It's a choice of method.
Limits to the strategy of going about your habits of business and dealing with
unintended consequences after they identify themselves are well documented in the
history books about extinct civilizations. With increasing frequency, the arrival
of "all the King's horses and all the King's men" on the scene is bad news to a
fallen Mr. H. Dumpty and his wall.
The event horizon for method
The professional defines himself to society by his practice relationship to the
event of damage. His realm of method terminates when damage occurs. He will not
be with the heroes on the podium receiving honors and awards from society for
bravery in responding to the incident. The occasion of damage carves a sharp notch
on the arrow of time separating the quiet methodological domain of damage preemption
from the sonic booms of damage response. The two regions of method technology are
fundamentally incompatible. The reward system of every society at every level is
extremely biased towards obedience and the valiant actions of post-damage response.
It is the express purpose of law to counterbalance this heavily skewed propensity
through incentives. Business as usual (damage response) is not the answer for
everything essential to preserve society.
When I first went to work on the 80th floor of World Trade Center 2 in 1980, it
was obvious to any professional engineer that the complex lacked basic emergency
facilities required by the building codes. When I brought the discrepancies up with
the authorities, I was berated for not appreciating that the government, builder of
the great twin edifice, can scorn the building codes with impunity. Here I was,
then, naively representing one system of method and caught on the turf owned by its
opposite. Every morning, now, I take my coffee from the blue inscribed cup given to
me by the NY Port Authority ("Welcome Back") as compensation for the "inconvenience"
it inflicted upon me in surviving the 1993 terrorist bomb in the WTC basement garage.
The only thing common to these two grossly disparate systems of method is that both
are driven by the same indifferent natural laws. Nature provides the omnipresent
force fields that allow but two spontaneously stable method systems. If you are not
trapped in the super stability state space of one realm, you will be captured by the
pull of the other attractor. Each realm of method has a unique, significant role in
nourishing and preserving society. Natural law forbids a third system and history
contains no exceptions. Our mythology and science fiction contain no exceptions.
The fact that only two systems of method separated by an event are possible in our
universe is emphasized because it serves to simplify apparent complexity. Even the
procedure is very simple. First, find the damage event horizon. If damage has already
occurred, forget preemption. The post-damage realm is ruled by great herds of damage
responders trained by the Establishment to search out and destroy your kind. If damage
has not yet occurred, set up your methodological toolbox for preemption and get busy.
Your orders are right there in your conditions of license.
Preemption and system design are methodologically the same thing. The realm-separating
event equivalent for system design is called the "release" even at the SEC. The work
done on the one side of the release event involves a content, context and process
alien to the other. To "release" is to acknowledge the transfer of domains, never in
person, always through standardized documents delivered by commercial couriers.
One of the best tools for quickly locating the transfer event horizon is provided by
natural law. Engineers call the infallible benchmark POSIWID - the purpose of the
system is what it does. Merely observe what the system does, its activity, and you
have abundant evidence as to which methodological realm is predominant. The two systems
are so dissimilar, it is impossible to mistake the actions of one for the other. No
one could confuse a Skunkworks with a firehouse. Any institution not actively trying
to prevent the damage problem is part of the problem. Methodological systems are an
all or nothing proposition. It is nature's way.
Another valuable distinguishing feature of method systems grounded in natural law
is extremely general applicability. Techniques leveraging the universal force fields
produce the same effect at every level, from interindividual to international. You
can try this at home. I am using the process of preventing damage to encourage the
SEC to prevent the substantial damage rapidly approaching your clients. POSIWID will
track mission success. This submittal is a trial of your procedure for preemptive
whistleblowing. Circumstances beyond our control have combined to put your approach
on the proving ground of the operational reality. Fasten your seat belt.
Material damage alert
Rapidly escalating prospects for serious harm to our client base compel a preemption
assault. Professional engineers, unlike the franchise of other professions in accounting,
law and medicine, are legally bound to serve the public paramount - in matters of safety,
health and welfare. We have the strict duty to warn. Professional engineers take a
public oath to reliably detect incipient project failure, report the facts and rationale
supporting that determination up the ladder and, if remedy is not effected prior to
damage, withdraw from the project. These duty requisites have existed in the code of
conduct for engineers, now maintained by the Accreditation Board for Engineering and
Technology (ABET), for more than a century.
The duty to warn to legal benchmarks is a canon of guild ethics I still find very
disagreeable and unrewarding. My three previous solicited responses to the SEC
concerning this matter have been disregarded. While there is no reason to expect
any public good from attempt four, if there was ever an occasion where a "noisy
withdrawal" could have some benefit other than preserving the hapless herald of
impending disaster, this is it.
The following "noise" fully satisfies my obligation to you as a professional watchdog
and completes my "withdrawal." Under your rule, the fact that all my preemptive efforts
with you have come to naught becomes your problem, not mine. The release from
responsibility for the approaching damage, that I earn herein, comes just in time.
Emergency
As clearly reported in my last submission, the social contract with commerce has
intentionally been broken en masse. Corporate liability insurance was deliberately
dropped across the board during 2002 policy renewals. This breach set powerful forces
in motion now driving corporate operations straight towards bankruptcy and liquidation.
Stakeholders, not corporate management, are again in line to lose everything - suddenly
and without notice. To the method technology practitioner, direct evidence is prominent
and abundant. Both the decision to drop the liability insurance and the subsequent
actions taken to support that decision are very easy to confirm independently.
Intellectual alibis for this breach are everywhere.
The mine canary for indigestion in commerce is the construction industry. The litigation
explosion began there in 1970. Liability insurance and bonding have already been
unaffordable in construction for years. The cause, dropping the insurance, is producing
unprecedented effects. The novel situation engages no conventional response plan. The
silence is deafening. One example next. Dozens are available.
On February 27, 2003, at a technical conference called by COATS (Construction Owner's
Association of the Tri-Sate), Khalid Durrani, of the US Army Corps of Engineers asked
for some insight from the other owners at the meeting. The COE has an important project,
the Omlstead Lock & Dam, at the confluence of the Ohio and Mississippi rivers. They
have been working on two 1200' locks and now are trying to get the dam built. It is a
project with an engineer's estimate of approximately $350M. The COE put the project
out for bid in Sep 02, 2002 and received no responses. The re-bid in Dec 02, 2002
brought the same result. Khalid came to the conference curious about what is happening
with the construction community. After all, with no bidders, he may have no job.
Several owners and others in the audience informed him that more of the larger contractors
are going out of business. The COE acknowledged that J. A. Jones, Guy F. Atkinson and
other large contractors that previously did their work are now bankrupt, in many cases
over disputed work with the government. The question arose as to why those working on
the locks didn't want the work. The answer came that due to insurance and bonding
requirements, viable contractors cannot get coverage. It takes about six insurance
carriers to pull together bonds on a $350M project, a feat no longer possible. Since
there is no standard fix for this problem, the COE immediately went into deep denial.
Do you think the ubiquitous, two-page ads by IBM Consulting are repeatedly placed
because business to support their 60,000 staff members is booming? If Establishment
IBM won't accept the operational reality, what hope is there for the investor? Will
his SEC watchdog thwart the imminent calamity or contribute to the damage? Nature
will see to it that it does one or the other. POSIWID
As easy as it was to detect the onrushing calamity in its incipient stage, it is as
easy to thwart. Preemption at this stage is neither complicated nor risky work. The
central issue now is how you will handle the built-in collision between your duty to
preempt and the appearance of disloyalty to the status quo for doing so. If you
choose obedience to authority as your goal, rather than your sworn duty to preempt,
you will be, in principle, complicit with those you regulate. Your choice.
The damage event itself, should one occur on his watch, instantly notifies the
professional of his dereliction of duty. Thereby his sense of self-worth is formed
and maintained by the effectiveness of his actions prior to damage. Roger Boisjolly,
who did his best to preempt the Challenger liftoff in 1986 through channels, is
haunted to this day, not because his life was ruined by his employer and his
government (all preemptive whistleblowers expect that), but because he failed
personally to prevent that horrific and unnecessary catastrophe. This event-driven
focus on selection of method is the mark of the true professional.
This hallmark is, exactly, the measure of you and your clients. If you embrace your
duty paramount, you will make preemption viable. If you do, it will be obvious by
the selection of actions you make. The same applies to your clients. If they are i
nto preemption, they will encourage and welcome initiatives to enhance that kind of
activity. POSIWID
When preemption is not welcomed, the response to initiatives like this submittal is
always deliberate ignorance. There you have your certain measure. Just answer the
question - why would a board of directors not be enthusiastic for simple, infallible
preemption technology? Why does it remain preoccupied with red flags among the
cooked books of accounts? Everyone knows that history and prophecy are the requisite
instruments of fraud. Can an ethical board not be into damage preemption? Where are
the CEOs loudly supporting preemption in our media? Is an ethical CEO not honor
bound to speak out against his unethical peers? Can a CEO comply with societal
expectations and quietly stand by while his peers trash one corporation after another
using the cover of bankruptcy law to escape with the loot?
The overarching challenge you face, ready or not, is time. It's not that legal
correctness and sound logic don't matter any more. It's that a horde of time-critical
issues are overrunning everything else. You obediently turn the crank on a system
geared for years of incremental adjustment. The long interlude between major scandals,
in the past, always allowed things to settle back down to blessed routine. In preemption,
time is no excuse. Look up, you are still dealing with the hot wreckage bequeathed by
the class of Enron, during your watch no less, and the next great menace to society
is already graduating.
The SEC is to be commended for providing this convenient format for the professional
to document the fulfillment of his obligation to you. As I continue on with my duty
to preempt up the ladder with other authorities having jurisdiction, as the law requires,
it is handy to have this public record available by URL as reference.
William L. Livingston, P.E.